Australian Rules Football and Perverse Incentives

Do sports league policies sometimes result in perverse incentives? In a 2002 Journal of Labor Economics paper, Beck Taylor and Justin Trogdon examined if changes in the draft sturcutre in the NBA generated the incentive to intentionally lose games. They collected data on three different seasons with different draft structures and examined what factors determine whether a particular team wins a game. Not surprisingly, playing at home or on a neutral court improves the odds of winning, as does having a higher win percent coming into the game. Playing a better opponent, also not surprisingly, hurts.

Interestingly, though, they found that when there was either a strict reverse-order draft or a weighted lottery system, non-playoff teams were more likely to lose than playoff teams. However, when the NBA had a lottery system to determine draft position, playoff status had no impact on winning.

So there is some evidence out there in the academic Econ literature that league policies can lead to perverse incentives.

All that being said, allegations of intentionally playing to lose had been levied against an Australia Rules Football League team, the Melbourne Demons. An "independent report" cleared the Demons of these charges, but what surprises me is that the AFL itself and some of its member teams have a financial interest in sports gambling. For example, the Demons owns the Bentleigh Club and the Leighoak Hotel which, together, own 172 gaming machines. From the operations of these machines, the Demons recieve about $5 million in revenue (source).

That's unusual to me since American sports leagues have gone through great pains over their histories to keep gambling at bay, lest it threatens the integrity of competition.